Markets Today: Shake-up for FTSE 100 and iShares clean energy fund, young people smoke more during lockdown
- Who will win and lose in the FTSE 100 reshuffle?
- iShares’ giant clean energy ETF faces another big overhaul
- Young people are smoking more, but tobacco shares remain unpopular
Will a soft shoe shuffle give ITV the boot?
It is FTSE reshuffle time. Mergers and acquisition activity is likely to play its part when the blue chip FTSE 100 index is next calibrated using the closing prices on Tuesday 31 August, with the likes of supermarket Morrisons (MRW) and defence engineer Meggitt (MGGT) in the running to be promoted after their share prices surged on the back of takeover offers.
But two companies who have not long been in the top league – ITV (ITV) and Weir Group (WEIR) – are under threat of being demoted unless there is a significant uplift in their shares over the next couple of trading sessions. Another company set to lose its FTSE 100 status is Just Eat Takeaway (JET), which despite being in the top half of the index in terms of value will be removed after switching its domicile to the Netherlands. This could open up a third slot for promotion, with Dechra Pharmaceuticals (DPH) currently in the running.
Early next year the index will also lose one of its biggest constituents, due to BHP’s (BHP) recently announced plans to simplify its structure and use Australia as its primary listing.
Read our latest analysis of the Just Eat and the takeaway delivery companies here. GD
iShares clean energy ETF faces further changes
The hugely popular iShares Global Clean Energy UCITS ETF (INRG) could be due another overhaul after S&P Dow Jones Indices proposed further changes to the index that the fund tracks.
Measures put out to consultation by S&P DJI could see the S&P Global Clean Energy index followed by the $5.9bn (£4.3bn) ETF take on emerging market stocks.
S&P DJI is also considering introducing specific criteria that stocks must meet to merit inclusion in the index. Under the proposals, companies would need to derive at least a quarter of their aggregate revenue from clean energy production and non-production related businesses to sit in the index. General utilities companies, meanwhile, would have to generate at least 20 per cent of their power from renewable sources.
A restriction preventing stocks from achieving a weighting in the index higher than five times its liquidity weight could also be refined.
The index already underwent a radical overhaul earlier this year. The number of companies it tracks rose from around 30 to a target of 100, with new methodologies introduced to give greater weight to more liquid stocks. The changes came in the wake of concerns that the clean energy ETF and its non-UCITS equivalent, having pulled in billions in 2020, had built up oversized stakes in smaller companies, prompting potential liquidity issues.
Read our take on the outlook for the ETF here. DB
Young people smoked more during lockdown
The youth are lighting up again.
According to a new study backed by Cancer Research UK, the proportion of 18 to 34-year-olds smoking cigarettes spiked from 22 to 27 per cent during the early months of lockdown. A similar increase was not observed in other age groups.
The survey appears to show a worrying health trend, which experts are now linking to lockdown-induced stress. But it may be good news for the tobacco giants – companies that before the Covid crisis were struggling with declining tobacco use among young people, as well as increasing pressure from campaigners.
Indeed, Imperial Brands (IMB) reported that in the six months to March 2021, tobacco revenues jumped 2 per cent to £1.6bn. But the cigarette company itself has said it does not expect its Covid sales increase to last. With a measly valuation of just 5 times earnings, it remains a pariah among both ESG investors and more profit-minded fund managers. OT
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